Q: Can you tell us what is driving the growth in electricals?Sebastian James:We’ve had a really good year in white goods and that’s largely been through things that we’ve done. We’ve massively extended the range that we carry and we can ship next day. We’ve also improved our next day cut off times, so you can now order up to midnight for a delivery 7am anywhere in the country. It’s a pretty tidy logistics operation and we’ve improved availability – not only on white goods but also on TVs, so we’ve seen good growth there. It’s been some self-help – we’ve gained market share, the markets are relatively flat, but we’re gaining some share.

“We continue to gain share from the independent sector, who find it difficult in this more challenging market”

Q: Where are you gaining market share from?SJ:We’ve gained share from AO for sure. We continue to gain share from the independent sector, who find it difficult in this more challenging market. And Amazon’s market share is not growing.

Q: Why do you think your electrical sales are growing when other retailers have seen a slowdown due to squeezed consumer spending?SJ: It’s a tough business to be in because of what you’re up against. It used to be that you could offer a very personalised service and differentiate yourself in that way, but now we recognise that with our scale and our ability to deliver so quickly across a huge range, our ability to install in one visit and to do gas and hard-wired electrical [installation]… all of these skills that we’ve developed over the last two or three years mean we’re offering a proposition that is very compelling. I think that has been quite difficult for some of the independent sector.

Q: Is that just in terms of white goods, or across the whole electrical sector?SJ: White goods is where the bulk of the independent sector is right now. There are a few audio specialists who are doing really hyped-up installations, such as the Bang and Olufsen stores, but we’re not making much of a dent in those because we don’t install a customer’s house full of hi-fi equipment.

We do a bit in Harrods, where we have a bespoke, high-end ‘oligarch’ section. The Harrods store is doing well.

“We’ve had a really good year in white goods. We’ve massively extended the range and we can ship next day”

Q: What about the smart home? Is that gaining any traction?SJ: Yes, it is, but people don’t wake up in the morning and think, ‘what I need today is a smart home’. On the whole it’s insidious. You buy a Sonos, then you buy an Amazon Alexa Echo, then a Philips Hue lightbulb and then a Nest and before you know it, your home is a smart home.

Everyone is jockeying for the hub. It’s a struggle for ownership, but we don’t care who you choose – our job is to make it all work together. In fact, we like big battles between suppliers – we tend to do well when they fight.

Q: Are you seeing a slowdown in white goods with the fall in the housing market?SJ: It’s very hard to work out what’s us and what’s the market. Our view is that the market is relatively quiet. but we’ve made huge in-roads in built-in cooking, where we’ve just massively extended our range and really got our act together. Our position in the market has changed quite a lot.

“The new battleground is delivery and service infrastructure. We’re now offering same-day, small-box delivery to 80 per cent of the population, who can order their products and get them within a couple of hours”

SJ: We’re pleased with electricals, but, in the UK and Ireland, the markets were concerned that there would be quite significant economic headwinds. The UK economy has been a bit sluggish, but it hasn’t gone to hell in a handbasket, and therefore we’ve been able to grow share and do ok. We remain very competitive. Our customer service metrics are still very strong and growing. And we’ve grown market share and that’s good.

The new battleground is delivery and service infrastructure. We’re now offering same-day, small-box delivery to 80 per cent of the population, who can order their products and get them within a couple of hours. And we’re offering midnight cut offs for anywhere in the country, except the Highlands and Islands.

This extended range has been helpful for us, and we’ve extended our Know How team propositions. We now have a 24-hour white goods repair service, and we’re trying to work out how we can do same-day white goods repair, so your food doesn’t even go off if your fridge breaks down. There are paradigm changes that we want to deliver on that we think no one else can do. And, of course, our understanding of digital customer marketing and our online proposition has meant that we’ve seen growth that we think is in excess of either AO or Amazon over that three-year period. So, we are feeling quite good about it. But we’re wary because we are also looking for UK consumer slowdown and if it were to happen, we’re ready for it. But we have lots of initiatives that we think will drive things forward really well and some of those we would have seen on Black Friday.

Q: Are you expecting any slowdown in online sales over the next few years?SJ: I think it reaches a natural asymptote [peak].

Humphrey Singer: The increase this year, interestingly, in the UK was just slightly less than it has been in previous years on Black Friday. But who the hell knows? It’s one weekend.

SJ:Our view is that it has a natural peak. And, actually, Amazon beginning to invest in stores is perhaps indicating that they’re also seeing the limitations of online trade.

HS: What we do know is there are a small number of people that just do everything online and never come near a shop. The vast majority – more than 90 per cent – are doing a bit of both. So, it’s a very interactive thing. Effectively that shopping journey is a mix of online and in-store.

“Amazon beginning to invest in stores is perhaps indicating that they’re also seeing the limitations of online trade”

Humphrey Singer

Q: What about inflation on electricals?HS:Many of our categories, such as TVs, deflate at a vertiginous [high] rate, and so you can see prices halve within less than a year. So it’s really not visible to customers.

The other thing is the ranges change all of the time, so you’re never comparing like for like. Every quarter you’ll have a new range of laptops and they’ll start off really expensive and then crash in price. That is the world we live in. So it’s not very visible that there might have been some kind of underlying inflation because of the exchange rate. You only buy a TV every four years and you come in with a budget – let’s say £600 – and you get a TV for £600, but you won’t notice that the TV that you might have had if we hadn’t had the change in exchange rate is slightly less highly specified. It’s just in order for the manufacturer to maintain its margins.

Q: So have you increased prices?HS:No, because we bring in new ranges. TVs often start at around £1,500 and they crash down from there. That’s every quarter or every half-year we’re bringing in a new range.

Q:What’s your split between online and in-store sales?SJ:To us, what matters is how many of our customers end up buying in any channel and end up spending some time in store – that’s just under 90 per cent. So out of anyone buying a big domestic appliance, a TV or a computer, just under 90 per cent will spend some of that journey in a store. If you’re blowing a month’s wages on something that’s going to be in your life for four or five years, you want to see, touch and feel it and have a conversation about it.

Of those, around 27 per cent in the UK end up buying by clicking rather than by saying ‘yes’ to a colleague. On Black Friday it was 41 per cent in the UK. More customers are deciding to make their purchases at home. One of the things that we must do in the coming years is discover how to do ‘pause and resume’ shopping. Our customers visit us on average 2.2 times for every large purchase in-store and many more times online. What we really want to do is get the richness of that search experience into the store and the richness of the conversation back online for customers.

Q: Was Black Friday better than you expected?SJ:We had a good Black Friday – thank heavens. We were expecting a good Black Friday; we were doing lots of things that we thought would be good, and we got it. The UK did well. We did better this year at stretching some of the trade into non-Black Friday days, which was helpful from a logistics point-of-view. But we still had record sales on the day in all territories, and across the promotional period.

Q: What’s your outlook for the UK market?HS: The electricals market, for a number of years, has been relatively quiet. It’s very mature and we’ve managed to grow due to gaining market share, which has been more than the market in general.

We are very aware of what many commentators say about the possibility of [the market] slowing down. I don’t really see it yet in the trade, but we know that economies are typically cyclical. And, depending on your political view, you may ascribe that to various different reasons, but we just have to be prepared for whatever comes. We just have to make sure we have the right robust, flexible business that can cope with whatever happens.

SJ: The very significant reduction in both space and lease lengths that we’ve now got means that we are much more flexible and resilient to change if it should happen. We don’t know if it will, but if it should, then we should be able to react quickly.